Why Apple is Giving up on iAd

If the report from John Paczkowski is true, and one would believe it is, Apple is giving up on iAd, its mobile advertising effort. This is probably good; Apple doesn’t do advertising well because advertising is about sales, compromise, and communications. Many of these things Apple does poorly, especially communications.

(See important update to this story below.)

Apple’s attempt to break into the mobile ad space was very much like its eBook pricing efforts. They came in like an elephant in a china shop, trying to dictate their terms, only to find out that the ad world wasn’t going to change its ways just for Apple. When Apple launched iAd in 2010, the company set the minimum spend for campaigns at $1 million, which got plenty of chuckles in the industry. Those who signed up were the same crowd who think dumping a year’s worth of ad budget on the Super Bowl is an advertising strategy.

Apple’s ad woes can be traced back to AdMob, the very popular ad network which looked like was about to be acquired by Apple … only to be bought by Google, instead. Desperate to get into the game, Apple acquired Quattro Wireless for $275 million instead.

Hardly a second prize, more like winning Miss Congeniality (but for Quattro Wireless it was hitting the jackpot). By August Apple shut down the ad network to replace it with iAd, but it hardly matters. As eMarketer’s chart shows, Apple remains a small player in mobile advertising, dominated by the two giants, Google and Facebook.

Paczkowski now says that after six years, Apple is breaking up the band while “getting out of the advertising-sales business and shifting to a more automated platform.”

The idea is to let publishers do the sales, and even keep all the revenue. So large is Apple, thanks to the iPhone, that whatever ad revenue it earned from mobile advertising just couldn’t move the needle enough to matter.

This shouldn’t be a surprise. I warned Talking New Media readers two years ago that the reason Apple was not maintaining the Newsstand categories and letting the App Store rot was that it didn’t matter to them.

The millions of dollars publishers were loosing in sales meant that Apple was only losing millions of dollars, when only billions would get their attention. This was all very important to publishers, of course, but their trade associations were too busy trying to paint a rosy picture of the industry to actually do any work like lobbying Apple to fix things for their members.

“The big publishing groups will just fold programmatic buys into the stuff they’re selling across all their properties,” a source told Paczkowski. That sounds about right. The solution will involve programmatic advertising, something important to a few big publishers.

This still leaves the same issue we all knew was important all the way back in 2010: how and who will sell tablet and mobile advertising for the rest of the industry. In 2010 there was talk about new ad networks being started up that wanted to sell into these new digital platforms. A few of the new digital publishing platforms were even giving away their solutions (mostly PDF based) in exchange for a chance to grow an ad network. This didn’t work because most of the new tablet and mobile apps being created were absolutely terrible – and it turned out the platforms couldn’t sell the ads anyways because so few major publishers would agree to come on board (though it was sad to see publishers like Digital First Media fall for the sales pitch).

In the end, what Apple has done well during this past decade was create great new hardware products. Services, sadly, are not their specialty.

Neither is communications. For a company that hates leaks, it seems odd that Apple would not be bothered that a program that affects its developers and publishing partners would be ended and word of it simply leaked out by BuzzFeed.

But Apple didn’t officially announce the end of the Newsstand until just before the release of iOS 9, so I suppose we won’t hear officially about the end of iAd until days before the plug is pulled.

Update: On Friday Apple gave developers a notice inside the Apple developer site about iAd, letting everyone know that come the end of June the service will be shutdown:

The iAd App Network will be discontinued as of June 30, 2016. Although we are no longer accepting new apps into the network, advertising campaigns may continue to run and you can still earn advertising revenue until June 30. If you’d like to continue promoting your apps through iAd until then, you can create a campaign using iAd Workbench. We will continue to keep you updated, but if you have any questions, contact us.

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Douglas Hebbard (or if you are using D.B. Hebbard use that) is a 30+ year veteran of the newspaper and magazine publishing business, and has been publisher of the digital publishing website Talking New Media since 2010.

3 Comments on Why Apple is Giving up on iAd

I find it odd to see the word “desperate” used in conjunction with Apple these days, a company with 200 Billion in cash, that is growing over 30% a year and is currently the most profitable company in the world. But given its amazing success, I understand the impulse to exaggerate any of its failures and missteps.

When Apple abandoned “Open Doc,” to much criticism at the time, Steve Jobs addressed a heckler in a famous video:

He said, “some mistakes will be made along the way, that’s good, because at least some decisions are being made along the way. And we’ll find the mistakes. We’ll fix them.”

I think that applies in this situation. There is a big problem with on-line advertising, a problem that is getting worse with all the debate now about ad blockers and bloated websites. The problem is even worse in mobile ads, and no one, including Apple, seems to have a good solution.

I think Apple deserves some credit for being ahead of the curve in trying to find a reasonable compromise, small ads that aren’t too obnoxious, and it’s a shame they didn’t work. I suspect it’s possible Apple figured they wouldn’t work, but decided they had to try. (As for insisting on million dollar accounts at first, it simply makes sense for them to try to make the big campaigns work first, before focusing on smaller stuff.)

The same I think applies to Newsstand. Apple at the time had magazines begging it to come up with a solution to falling sales, and Apple tried something. It didn’t work. But no one else has a good solution either.

As for not doing services well, Apple has 50% of smartphone share in the USA, is a massive player world wide, and most of those phones rely on iCloud services. After some mistakes with Mobile Me, Apple seems to be doing pretty good with iCloud. Apple Music also looks like a hit, and after some early missteps, Apple Maps are used more than Google Maps on iOS. iTunes is still the most popular music download service. Apple’s app store is a very popular service. Apple makes billions from selling services.

On the communications front, Apple is doing a very good job, by most reports, getting Swift adopted as a new programming language. And that takes enormous communications support. I don’t think it’s that odd Apple didn’t go out of it’s way to publicize the collapse of NewsStand. Bad news isn’t exactly fun to deliver, and the publishers had to know the writing was on the wall.

I think it’s a good thing Apple is getting out of the ad business, but I suspect it will continue to look for ways to solve the mobile ad problem, perhaps by outsourcing it directly to publishers. Apple makes mistakes, but at least its trying new things. And to it’s credit, when things don’t work it’s pretty quick to fix them. That’s why it’s so successful.

1. Apple negotiated to purchase AdMob at $400. AdMob then played its cards to get a $750 million bid out of Google in hopes of getting an even higher bid out of Apple. Apple walked away and purchased Quattro instead even though they could have easily outplayed Google with it still being pocket change. How is that desperation?

2. The fact that John Paczkowski got a scoop out of the ad/media industry that was confirmed by Apple PR within a couple of days doesn’t reflect poorly on Apple’s communications. It merely appears to be normal Apple communications and a normal quality leak/story for John Paczkowski — something he’s been doing for almost 10 years.

3. It’s not clear that Apple’s goal was to become the biggest player in mobile advertising (in fact, just looking at their efforts, it seems rather clear that was not the goal). Certainly they also wanted to limit 3rd parties from gaining outsized power, wanted to limit the leak of demographic data (early players were trading in iOS demo data as much as they were advertising), wanted to learn what user data was useful to advertisers, how it was being used, and to what extent that should be limited or allowed, and wanted to limit the amount of ugly, low-quality, intrusive ads. It’s easy to say they didn’t accomplish these goals either but considering the state of the ad market and where it was going then, Apple certainly was able to slow things down and learn a fair bit.

4. Apple resisted going to programmatic selling and wanted to be involved in creative, publishing, purchasing; they’re now moving to programmatic advertising as a service. That is, for six years they did it the Apple way as they slowly moved to smaller and more programmatic buying and are now doing it the Google, automated internet-service method.

5. The idea that Apple was looking for a major source of revenue rather than conducting a defensive experiment that they still insisted on breaking even or being profitable is laughable. So the question remains: was Quattro a reasonable investment and did it yield justifiable revenue over the last 5 years. The fact that few have attempted that math suggest to me that it likely was.